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THE  RELATIONS 


OF 


KANSAS  RAILROADS 


TO   THE 


STATE  OF  KANSAS 


NORRIS  L.  GAGE. 


TOPEKA,  KANSAS. 

KANSAS    PUBLISHING   HOUSE:    T.  D.  THACHER,  STATE    PRINTER. 
1884. 


THE  RELATIONS 


OF 


KANSAS  RAILROADS 


TO    THE 


STATE  OF  KANSAS. 


NORRIS  L.  GAGE. 


TOPEKA,  KANSAS. 

KANSAS    1'UBLISHING    HOUSE:    T.  D.  THACHER,  STATE    PRINTER. 
1884. 


"SUITABLE  railways,  honestly  and  sensibly  managed,  furnish  the  cheapest  possible 
transportation;  and  can  be  supported  by  even  the  poorest  communities." — [FAKLKHJH. 

"THE  railroads  of  the  United  States  assure  us  commercial  supremacy;  make  fam- 
ine impossible,  and  insure  general  prosperity  and  plenty,  by  carrying  local  surplus  to 
the  relief  of  local  failure." — [POOR'S  MANUAL,  1883. 


STATEMENT  OF  THE  FACTS,  AND  REVIEW  OF  THE  SITUATION. 


THE  management  of  the  Atchison,  Topeka  &  Santa  F6  Railroad  Com- 
pany have  requested  me  to  investigate  the  transportation  question,  as 
affecting  the  interests  of  the  State  of  Kansas  and  the  interests  of  the 
Atchison  road,  and  to  submit  the  results  of  such  investigation  to  the 
Honorable  Board  of  Railroad  Commissioners. 

This  request  appears  to  have  been  made  in  consequence  of  certain- 
complaints  now  pending  before  this  commission. 

It  appears  that  the  railroad  law  of  Kansas  requires  two  things  —  first, 
that  freight  rates  shall  be  regulated  so  as  not  to  unjustly  discriminate 
between  individuals  or  between  localities;  and  second,  that  such  rates 
shall  be  reasonable. 

UNJUST  DISCRIMINATIONS. 

No  complaint,  whatever,  of  unjust  discriminations  has  been  made 
against  the  Atchison,  Topeka  &  Santa  Fe  Railroad  Company,  except  in 
the  case  of  Osage  City  as  to  coal  rates,  and  this  complaint  seems  finally 
to  have  resolved  itself  into  a  desire  for  reduced  coal  rates.  (Since4  this 
statement  was  prepared,  the  city  council  of  Osage  City  has  taken  the 
necessary  action  to  withdraw  the  complaint  of  that  city.) 

Thus  one  entire  branch  of  alleged  abuses  is  eliminated  from  this 
hearing,  and  that,  too,  a  branch  which  has  everywhere  given  rise  to  the 
most  numerous  and  most  serious  complaints.  Heretofore,  in  the  old 
countries  and  in  all  of  the  United  States,  the  great  cause  of  complaint 
has  been  alleged  unjust  discriminations,  either  between  individuals  or  be- 
tween rival  localities.  The  history  of  the  railroad  problem  shows,  that 
wherever  and  by  whomsoever  it  has  been  investigated,  it  has  been  conceded 
that  the  precise  range  of  rates  was  not  a  matter  of  so  much  importance 
to  shippers  and  to  the  public,  as  it  was  to  have  them  uniform  under  like 
circumstances  and  free  from  unjust  discriminations. 

It  has  not  been  the  result  of  chance,  that* the  adjustment  of  rates  on  the 
Atchison  system  of  roads  has  been  such  as  to  avoid  in  the  main  charges 
of  this  kind,  but  it  has  been  the  result  of  great  care  and  a  scrupulous 
attention  to  the  equities  of  the  situation  and  the  rights  of  all  parties. 


This  success  has  been  attained  in  the  face  of  the  most  severe  and  constant 
pressure  and  temptation  on  the  part  of  many  of  its  patrons  in  the  di- 
rection of  favoritism,  and  of  itself  tends  strongly  to  show  that  the  com- 
pany has  been  actuated  by  similar  correct  business  principles  when 
dealing  with  the  other  branch  of  the  question,  namely,  that  of 

REASONABLENESS  OF  RATES. 

Out  of  the  many  hundreds  of  townships  and  cities  on  the  line  of  the 
Atchison  railroad  system,  for  which  the  law  provides  a  cheap  and  easy 
•way  of  making  complaints,  only  three,  and  those  with  a  strongly  pro- 
tiounced  division  of  sentiment,  claim  that  their  freight  rates  are  not 
reasonable";  and  these  three  cities  only,  to  wit,  Great  Bend,  Newton  and 
Osage  City,  have  entered  complaints  before  the  State  Board  of  Com- 
missioners, as  provided  by  law.  At  the  other  hundreds  of  townships 
and  cities  either  no  action  whatever  has  been  taken,  or  expressions 
favorable  to  the  reasonableness  of  the  company's  rates  have  been  given, 
and  this  after  the  law  has  been  in  force  more  than  one  entire  year.  It 
.appears,  therefore,  that  no  wide-spread  or  general  dissatisfaction  exists 
^imong  the  actual  patrons  of  the  road,  as  has  been  frequently  and  loosely 
stated  by  persons  who  were  either  honestly  ignorant  of  the  real  Situation, 
or  who  were  influenced  by  considerations  not  creditable  to  themselves 
and  not  worthy  of  consideration  by  this  or  any  other  tribunal. 

This  tends  strongly  to  corroborate  what  the  experience  of  the  officers 
of  this  road  shows  to  be  true,  that  there  is  in  the  main  a  decided  feel- 
ing of  harmony  existing  between  the  road  and  its  patrons,  and  especially 
«o  when  we  reflect  that  the  nature,  extent  and  variety  of  the  business  is 
such*  that  it  is  not  possible  to  satisfy  everybody.  It  is  an  axiom  of  gov- 
ernment, that  its  value'  is  largely  in  the  content  it  gives;  and  this  state 
of  facts  should  have  its  full  weight  with  the  Board  in  deciding  the 
three  complaints  which  have  been  made.  No  doubt  every  patron  of 
the  road  would  like  to  have  his  rates  cut  down  until  they  entirely  dis- 
appeared, if  it  were  possible;  so  also  would  the  company,  if  it  were 
possible;  but  this  cannot  be  considered  a  complaint  in  any  business  or 
legal  sense. 

The  complainants  in  these  cases  advance  no  method  whatever  by 
which  to  decide  this  most  vital  question.  They  ask  for  lower  rates  on 
general  principles,  without  assuming  to  prove  whether  the  present  rates 
.are  or  are  not  reasonable. 

The  Board  of  Commissioners  in  its  preliminary  consideration  of  this 
subject  has,  however,  set  up  two  tests  by  which  to  determine  the  reason- 
ableness of  the  rates  now  in  force  by  the  company  —  first,  by  compari- 
son with  the  rates  prescribed  by  the  Commissioners  of  Illinois  in  their 


revised  schedule  of  1882;  and  second,  by  an  examination  of  the  receipts 
and  profits  of  the  company. 

These  tests  may  be  accepted  as  fair  ones,  provided  they  are  applied  io 
Ti'ew  of  all  the  facts  and  conditions.  It  is  plain  that  a  direct  compari- 
son of  rates  is  misleading  and  worse  than  useless,  unless  we  have  a  gen- 
eral knowledge  of  the  conditions  which  govern  them.  The  Board  has 
not  heretofore  had  its  attention  called  fully  to  these  conditions,  and  may 
not  have  given  them  that  weight  to  which  they  are  justly  entitled.  It 
will  be  conceded  that  all  parties  in  interest  have  heretofore  been  acting, 
to  a  greater  or  less  degree,  in  the  dark  as  to  the  facts  and  the  bearings  of 
the  law  when  applied  to  railroad  business,  and  that  the  magnitude  of 
the  interests  involved  requires  that  the  subject  should  now  be  considered,, 
as  far  as  possible,  in  its  entirety. 

KANSAS  AND  ILLINOIS  RATES  COMPARED. 

Freight  rates  should  range  higher  in  Kansas  than  in  Illinois,  for  these 
reasons : 

No.  1.  In  the  State  of  Illinois  there  are  fifty-five  persons  to  the  square 
mile,  while  in  Kansas  there  are  only  twelve  persons  to  the  square  mile,, 
making  the  former  State  more  than  four-and-a-half  times  more  densely 
populated  than  the  latter.  More  than  seventy-three  per  cent,  of  the 
land  in  Illinois  is  improved,  while  only  about  twenty  per  cent,  of  the 
land  in  Kansas  is  improved.  In  Illinois  the  population  per  mile  of 
railroad  is  more  than  fifty  per  cent,  greater  than  in  Kansas.  True,  the 
railroad  mileage  per  square  mile  of  territory  is  not  so  great  in  Kansas 
as  in  Illinois;  but  if  no  impediment  is  thrown  in  the  way  by  the  State, 
and  even  a  part  only  of  the  roads  are  built  which  ha.ve  recently  been 
inaugurated,  competition  among  railroads  will  very  soon  be  as  intense 
in  Kansas  as  in  any  part  of  the  country,  if  indeed  it  be  not  so  now. 

No.  2.  The  live  stock  traffic  in  Kansas  is  in  the  main  spasmodic,  and 
not  continuous.  During  the  cattle  drives  from  the  South,  and  the 
annual  "round  ups"  in  the  West,  this  traffic  has  been  large  for  about 
four  months  in  the  year,  while  during  the  balance  of  the  year  most  of 
the  stock  cars,  and  their  motive  power,  remain  idle.  Seventy-four  per 
cent,  of  the  entire  cattle  movement  on  the  Atchison  road  in  the  year 
1883  was  made  in  the  four  months  of  August,  September,  October,  and 
November.  About  six  times  as  many  cattle  cars  are  required  during 
those  four  months  as  are  required  during  the  other  eight  months.  As 
this  is  not  a  dull  time  on  other  roads,  it  is  not  possible  to  hire  cattle 
cars  during  this  period,  and  the  result  is  that  during  eight  months  in 
the  year  miles  of  side  track  are  filled  with  these  idle  cars,  a  few  being 
forced  at  an  additional  expense  into  lines  of  business  for  which  they  are 


6 

not  adapted.  Everywhere  east  of  the  Missouri  river  it  is  a  fat-cattle 
traffic,  and  very  nearly  continuous  during  the  year;  and  these  condi- 
tions, so  much  to  the  disadvantage  of  this  road,  only  exist  on  a  few  roads 
west  of  the  Missouri  line,  which  run  out  and  tap  the  great  grazing  fields. 

It  is  clear  that  a  live-stock  business  of  this  character  cannot  be  done 
as  cheaply  as  a  continuous  business,  and  it  is  also  clear  that  it  would  be 
better  for  the  road,  for  its  patrons,  and  for  the  State  at  large  (while 
injuring  no  one)  if  during  such  dull  periods  the  company  could  use  this 
extra  motive  power  on  heavy  and  special  kinds  of  work  which  admit  of 
only  the  lowest  prices  —  such  as  filling  "stone  contracts  for  public  works 
and  the  like — without  subjecting  itself  to  a  multiplicity  of  suits  for  dis- 
criminations, as  might  be  the  case  under  the  present  law  if  rigidly  en- 
forced. This  illustrates  the  kind  of  commercial  freedom  which  the 
company  asks  upon  every  principle  of  equity  and  economy,  and  for  its 
patrons  as  well  as  for  itself. 

No.  3.  Railroad  transportation  cannot  be  sold  in  Kansas  as  cheaply  as 
in  Illinois,  for  the  same  reason  that  groceries,  hardware  and  agricultural 
implements  cannot  be  sold  as  cheaply.  Distance  from  the  base  of  sup- 
plies is  the  important  element  which  enters  into  the  cost  of  everything 
of  a  heavy  or  bulky  nature.  It  would  not  be  fair  for  the  dealer  at 
Osage  City,  at  Newton,  or  at  Great  Bend,  to  be  forced  by  law  to  sell 
these  articles  at  Peoria  or  Galesburg  prices;  and  it  would  be  an  additional 
hardship  if  he  were  forced  to  remain  in  business  at  all  hazards  and 
without  regard  to  profits,  as  is  the  railroad  company. 

No  tribunal  having  power  to  fix  the  prices  on  merchandise  should 
exercise  it  in  such  a  case  except  under  the  most  severe  provocation,  and 
then  at  a  most  conservative  limit,  even  though  there  might  be  a  unani- 
mous desire  on  the  part  of  the  purchasers  to  secure  the  articles  as  cheaply 
as  possible.  Iron,  steel,  machinery,  lumber,  railroad  ties,  tools,  oils  and 
supplies  of  all  kinds  are,  and  always  will  be,  dearer  in  Kansas  than  in 
Illinois.  No  art  or  legislation  has  yet  been  able  to  overcome  this  law 
of  nature.  Railroads  themselves  have  come  the  nearest  to  it,  as  is  shown 
by  the  fact  that  without  them  the  great  bulk  of  Kansas  to-day  would 
necessarily  be  without  towns  or  farms,  and  its  occupancy  contested  by 
cattle  herders  and  Indians.  Justice  to  themselves  as  well  as  to  the  rail- 
roads require  that  the  Commissioners  and  the  people  of  Kansas  should 
not  ignore  this  fact. 

No.  4.  By  far  the  largest  single  item  of  freight  shipped  on  Illinois  roads 
consists  of  coal.  It  fs  of  a  high  steam-producing  quality,  and  is  found 
in  large  quantities  nearly  all  over  the  State.  Immense  shipments  are 
being  made  in  continuous  volumes  to  Lake  Michigan,  the  canals,  the 
Ohio  river,  and  the  great  manufacturing  centers  within  and  adjacent  to 


the  State.  Every  one  knows  that  the  cost  of  moving  coal  diminishes 
rapidly  as  the  amount  increases  and  the  shipments  become  uniform,  un- 
til what  are  known  as  the  "coal  roads"  reach  the  lowest  limit  of  cost. 

On  the  line  of  the  Atchison  road  in  Kansas,  coal  is  produced  and 
shipped  in  comparatively  small  quantities.  Of  the  total  product  in  the 
year  1883,  seventy-one  per  cent,  was  during  the  six  winter  months,  and 
this,  no  doubt,  fairly  represents  the  movement  in  the  summer  and  win- 
ter months.  It  cost,  in  1883,  on  the  track  at  the  points  of  production, 
an  average  of  $2.48  per  ton,  while  the  average  cost  on  the  Chicago  & 
Alton,  the  C.  B.  &  Q,.,  and  the  Wabash  roads,  for  the  same  year,  was 
$1.40  per  ton,  as  per  statement  herewith  submitted.  Taking  quality  into 
account,  the  Atchison  road  paid  more  than  twice  as  much  per  ton  for  its 
coal  as  was  paid  by  the  great  roads  in  Illinois.  On  the  total  amount 
>used  by  the  company  in  Kansas  in  1883,  the  difference  would  amount 
to  about  $250,000. 

To  this  extent,  on  that  one  item,  in  one  year,  nature  discriminated 
against  the  Atchison  road  compared  with  an  Illinois  road.  The  pro- 
ducer, as  well  as  the  carrier,  must  submit  to  such  natural  discriminations, 
believing  that  they  are  just,  or  at  least  unavoidable,  and  that  the  dif- 
ference will  be  made  up  in  other  ways  by  the  great  laws  of  compensa- 
tion, such  as  relative  cheapness  of  our  lands,  and  rapid  development  of 
our  State  compared  with  other  States. 

With  us,  coal  is  used  mainly  in  the  winter  season,  and  for  domestic 
purposes,  and  for  quality,  quantity  and  cheapness  of  production  cannot 
be  compared  with  Illinois  coal. 

This  necessary  high  price  of  coal  is  a  fact  of  as  much  importance  to 
the  Atchisou  road  as  a  consumer  as  it  is  to  the  other  consumers  along  its 
line.  If  the  road  was  as  favorably  situated  with  reference  to  coal  as  are 
the  great  roads  in  Illinois,  it  would  be  of  incalculable  value  to  the  road 
itself,  as  well  as  its  patrons;  and  it  could  afford  to  move  it  at  Illinois 
rates,  while  all  other  rates  could  also  be  reduced. 

It  will  be  seen  that  there  are  three  reasons  why  coal  cannot  be  moved 
at  as  low  a  rate  in  Kansas  as  in  Illinois  —  first,  smaller  volume  of  move- 
ment; second,  less  uniformity  of  movement;  third,  greater  cost  of  the 
coal  consumed  by  the  road  in  the  movement.  The  last  reason  is  also  a 
material  element  in  enhancing  the  cost  of  all  freight  and  passenger  move- 
ments on  this  road. 

No.  5.  A  glance  at  the  map  of  the  United  States  will  show  that  Illi- 
nois is  so  located,  and  the  railroad  routes  east  and  west  are  so  established, 
that  the  vast  commerce  of  the  great  West,  Northwest  and  Southweast, 
each  an  empire  of  itself,  is  poured  to  and  fro  in  ceaseless  volumes  across 
that  State.  The  same  remarks  apply  to  Indiana  and  Ohio  rates.  It 


8 

goes  and  comes  by  the  unbroken  train-load,  and  costs  those  roads  very 
little  in  the  way  of  original  investment  or  of  current  expenses  to  gather 
it  up,  compared  to  what  it  has  cost  the  Atchison  road  to  gather  up  and 
in  most  cases  to  actually  create  its  through  business  from  the  west;  and 
in  this  way  the  roads  of  that  State  are  assisted  by  their  location,  and 
have  means  of  reducing  local  rates  accordingly. 

No.  6.  There  are  other  special  reasons,  each  of  a  material  character, 
which  operate  against  the  cheapness  of  rates  on  the  Atchison  road,  such 
as,  liability  to  drouth  in  some  parts  of  the  State,  the  high  percentage  of 
land  unfitted  for  cultivation,  and  destructive  effects  of  lime  and  alkali 
water  on  boilers  and  machinery.  A  set  of  locomotive  boiler  flues  lasts 
three  years  in  Missouri  or  Illinois,  and  only  eight  months  in  Kansas. 

It  must  be  conceded  that  these  differences  are  substantial;  that  they 
are  based  upon  sound  business  principles;  and  that  they  appeal  to  the 
common  sense  of  every  intelligent  man. 

INTERNAL  EVIDENCE. 

There  is  also  a  mass  of  internal  evidence,  not  dependent  upon  com- 
parisons, going  to  show  that  Kansas  rates  are  reasonable,  and  some  of 
which  should  be  noticed.  Every  road  in  the  State,  except  one,  has  been 
forced  by  these  rates  into  bankrupcty.  At  present,  on  no  Kansas  road 
will  Kansas  business  more  than  pay  running  expenses,  fixed  charges, 
and  keep  the  road  up  in  repair.  But  few  of  them  can  do  that  much, 
and  not  one  can  pay  a  dividend  on  Kansas  business.  Except  the 
Atchison  road,  not  one  of  them  has  been  able  to  stand  alone,  and  not 
one  of  them  could  do  so  now  except  for  the  aid  it  receives  from  its 
stronger  foreign  allies,  who  live  in  hopes  of  a  better  future.  Even  the 
Kansas  Pacific,  with  the  aid  of  its  Colorado  business,  became  so  poor  that  it 
could  not  furnish  facilities  for  the  convenience  and  safety  of  its  patrons, 
and  finally  ceased  to  exist  as  an  independent  road.  These  results 
mainly  were  the  necessary  product  of  the  situation,  and  could  not  have 
been  avoided,  when  the  rates  and  amount  of  business  are  considered. 
On  all  Kansas  roads,  during  all  these  years,  the  rates  have  constantly 
been  decreasing  and  have  not  materially  varied  compared  with  each 
other.  The  desperately  bad  condition  to  which  some  of  them  have  been 
driven  in  the  way  of  facilities  for  the  comfort,  convenience  and  safety  of 
their  patrons,  is  becoming  known  to  your  Board.  That  the  Atchison 
road  is  an  exception  to  this  rule,  may  be  accounted  for  by  reasons  which 
will  appear  further  on. 

None,  except  those  entirely  ignorant  of  the  rudiments  of  the  subject, 
have  ever  pretended  that  the  rates  on  local  freight  gathered  up  along 
the  line  of  a  road,  should  be  as  low  as  through  rates  on  the  great  trunk 


9 

lines  between  important  points,  where  the  large  volume  of  business,  its 
continuous  supply,  competition  by  water  and  rail,  assurance  of  return 
freight,  absence  of  local  station  charges,  and  many  other  circumstances, 
make  low  rates  possible.  It  can  readily  be  seen  that  rates  from  points 
west  to  the  Missouri  river  cannot  be  as  low  as  those  from  the  Missouri 
river^  to  Chicago,  and  that  the  latter  cannot  be  as  low  as  those  from 
Chicago  to  New  York,  nor  the  last  as  low  as  those  from  New  York  to 
Liverpool.  It  is  equally  true,  and  for  the  same  reasons,  that  rates  between 
intermediate  points  both  of  which  are  within  any  one  of  these  great  di- 
visions, can  be  made  less  as  we  go  east,  because  it  costs  less  to  do  the 
business,  all  things  considered. 

The  relative  low  price  of  lands  and  all  real  estate  at  local  stations- 
and  in  remote  sections,  compared  with  prices  near  great  competing  cen- 
ters, has  been  long  fixed  with  reference  to  this  law  of  transportation. 
Take  land  in  central  Kansas,  which  will  produce  sixty  bushels  of  corn 
or  twenty-five  bushels  of*  wheat  per  acre,  and  compare  it  with  land  of 
equal  productive  capacity  in  central  Illinois  or  central  New  York,  and 
the  disparity  in  prices  will  be  enormous.  The  present  disparity  between 
rates  is  not  so  great  as  that  between  prices  of  land  at  those  three  points, 
as  is  shown  by  the  enormous  emigration  to  this  State.  That  is  to  say,. 
Kansas  rates  are  the  cheapest,  all  things  considered,  or  the  tide  of  emi- 
gration would  be  reversed.  It  is  in  the  interest  of  Kansas  roads,  as 
well  as  of  the  State,  that  this  condition  should  be  maintained,  and  it  is 
not  right,  by  summary  action  in  the  interest  of  one  party  only,  to  force 
rates  down  to  a  point  which  will  make  the  disparity  still  greater,  when 
it  is  at  present  enormously  in  favor  of  Kansas  growth  and  development* 

We  submit,  therefore,  that  the  facts,  first,  that  Kansas  rates  permit  a 
development  nowhere  equaled,  and  second,  that  Kansas  rates  on  Kansas 
business  do  not  pay  expenses,  furnish  internal  proof  not  dependent  upon 
comparisons  which  may  be  faulty,  that  the  Atchison  rates  comply  with 
the  law  which  requires  them  to  be  reasonable. 

THROUGH  AND  LOCAL  RATES. 

It  may  not  be  out  of  place  to  notice  here  the  statements  which  are 
sometimes  made,  that  rates  from  local  points  are  too  high,  compared 
with  the  low  rates  which  are  made  for  longer  hauls  between  great  com- 
peting points,  and  that,  if  the  roads  can  afford  to  do  the  competitive 
business  at  the  low  rates  received,  they  can  afford  to  do  local  short-haul 
business  at  corresponding  rates. 

Now  the  facts  are,  that  nearly  all  railroads  have  to  earn  a  large  part 
of  their  living  from  their  local  business,  and  are  obliged  to  take  the 
through  or  competitive  business  for  whatever  profits  they  can  make  out 


10 

of  it,  or  not  take  it  at  all ;  and  to  the  extent  of  their  net  profits  on  their 
competitive  business  over  and  above  actual  cost  of  the  train  service,  they 
can  reduce  their  local  rates. 

A  competitive  point  is  one  whose  location,  or  water  communication,  or 
numerous  railroad  extensions  to  different  markets  of  the  world,  are  such 
that  the  town  has  power  to  dictate  to  a  given  railroad  its  rates  from  that 
point.  The  road  should  be  allowed,  in  the  interest  of  its  local  patrons, 
as  well  as  in  its  own  interest,  to  accept  the^business  at  even  this  low  rate, 
if  it  can  make  even  a  small  profit  from  the  same.  Deprive  the  road  of 
that  small  profit,  and  then  it  must  necessarily  exist  alone  on  the  local 
business.  The  road  is  constructed  through  to  the  competitive  point 
mainly  for  the  purpose  of  doing  the  way  business.  Its  fixed  charges,  in- 
terest on  bonds,  taxes,  maintenance  of  way,  etc.,  go  on  year  after  year, 
whether  it  takes  or  refuses  the  competitive  business.  If  it  is  forced 
to  reduce  its  way  business  to  a  mileage  rate  corresponding  with  the 
rate  which  the  competitive  point,  on  account  of  its  location,  can  force 
it  to  take,  it  is  robbed  of  its  sustaining  power,  and  must  go  into 
bankruptcy.  Sooner  than  accept  this  alternative,  the  road  would  be 
obliged  to  give  up  the  thorough  business,  and  maintain  itself  on  its 
local  business.  If  it  charges  only  a  fair  rate  to  its  local  patrons, 
a  rate  very  much  less  than  they  could  get  in  any  other  way,  it 
seems  plain  that  it  should  be  allowed  to  take  business  at  the  competi- 
tive point  at  any  rate  which  may  be  forced  upon  it,  provided  it  yields  a 
profit  above  the  naked  cost  of  the  train  service.  It  is  that  or  nothing 
with  the  road.  As  before  stated,  such  through  business  can  be  and 
should  be  done  materially  cheaper  than  a  scattered  local  business;  but 
wherever  the  through  rate  is  cut  down  to  a  point  below  what  it  should 
be,  compared  to  the  local  rate,  as  between  Kansas  City  and  Chicago,  or 
Chicago  and  New  York,  it  will  be  found  that  such  low  through  rate 
was  forced  upon  the  road  by  a  power  over  which  it  had  no  control,  as  in 
the  former  case  by  the  rival  route  to  the  world's  markets,  the  Missouri 
and  Mississippi  rivers,  and  in  the  latter  case  by  the  Great  Lakes  and  the 
Erie  canal.  Now,  while  the  through  rate  on  grain  from  Kansas  City  or 
St.  Louis  to  New  York  is  lower  than  it  should  be,  compared  with  local 
rates,  and  is  lower  than  the  rates  from  local  points  on  the  roads,  which 
points  are  nearer  New  York,  still  those  roads  must  take  the  grain  at 
whatever  prices  the  rival  river  route  to  the  ocean  dictates,  or  leave  it 
alone.  If  the  through  rate  pays  even  a  small  profit  above  actual  cost 
of  the  haul,  it  helps  the  road  that  much,  and  it  helps  the  local  patrons 
that  much,  as  thfe  roads  must  be  kept  running  by  some  one;  and  more 
than  all  others,  it  helps  the  Kansas  farmer.  The  tendency  of  railroads 
when  left  alone  is  always  to  give  long-haul  shipments  the  preference, 


11    . 

and  any  inter-state  commerce  legislation  by  Congress  will  inevitably 
tend  to  increase  the  rates  between  the  Atlantic  seaboard  and  Kansas; 
and  while  it  may  help  some  intermediate  State,  it  will  injure  the  Kan- 
sas producers. 

This  same  sound  business  consideration  is  sometimes  presented  to  a 
road  on  its  State  business.  Same  natural  product  remains  dormant,  or 
is  going  to  decay.  It  cannot  be  utilized  by  its  owners  at  rates  which  are 
required  on  the  mass  of  busines^  in  order  to  keep  the  road  running. 
But  the  somewhat  less  rate  which  it  can  pay  will  make  a  little  profit  to 
the  company  (above  the  cost  of  train  service),  considering  that  the  fixed 
charges  of  the  company  (about  fifty  per  cent,  of  entire  expenses  of  the 
road)  are  going  on  whether  this  particular  business  is  or  is  not  taken. 
Now  if  this  product  does  not  come  into  competition  too  much  with  pro- 
ducts which  are  paying  full  rates,  it  may  be  best  for  all  parties  that  it 
be  encouraged.  There  is  a  perfect  maze  of  facts,  figures  and  conditions 
which  bear  upon  each  one  of  the  numerous  applications  of  this  kind 
which  are  constantly  being  made  to  a  great  system  of  roads,  and  there 
is  an  exceeding  reluctance  on  the  part  of  any  management  to  enter  into 
this  branch  of  rate-making;  for  however  wise  the  result,  it  will  be  sub- 
ject to  hostile  criticism  by  those  who  are  not  educated  into  a  perfect 
knowledge  of  the  entire  situation. 

I  have  given  ample  reasons  why  rates  for  all  distances  on  the  Atchison 
road  should  be  materially  higher  than  those  of  an  old  State  like  Illinois, 
and  have  pointed  out  internal  evidence,  which,  if  it  does  not  absolutely 
prove,  at  least  raises  a  strong  presumption  that  such  rates  are  rea- 
sonable. 

RAILROADS  THE  FRIENDS  OF  LONG-HAUL  TRAFFIC. 

Notwithstanding  these  decided  disadvantages  with  which  the  Atchison 
road  has  had  to  contend,  the  Board  of  Commissioners,  in  their  prelimi- 
nary consideration  of  January  1st  last,  show  that  for  the  first  seventy  miles 
west  of  the  Missouri  river,  these  rates  are  substantially  as  low  as  on 
roads  of  the  first  class  in  Illinois,  and  should  not  be  disturbed  —  the 
Illinois  rates  having  been  prescribed  by  State  commissioners  who  had 
ample  powers  conferred  on  them  by  law,  who  were  acting  in  the  interest 
of  low  rates,  and  who,  it  is  claimed,  were  traffic  experts. 

The  fact  that  the  Atchison  road,  with  the  odds  so  largely  against  it, 
has  voluntarily  made  a  very  low  rate  for  these  distances,  certainly  does 
not  show  a  grasping  disposition  on  the  part  of  the  road  at  points  where 
it  might  have  been  exercised  as  freely  as  at  any  other  points.  The  facts 
will  show  that  for  longer  hauls  those  rates  have  been  placed  equally  low, 
all  things  considered. 

In  this  connection,  it  should  be  remembered  what  the  road  has  already 


12 

done  voluntarily  in  the  way  of  equalizing  the  charges  for  long  hauls 
compared  with  the  charges  for  short  hauls,  and  of  placing  towns  remote 
from  the  Missouri  river  on  an  equality  with  towns  nearer  the  river. 

From  Great  Bend  to  the  eastern  terminus  of  the  road  at  Atchison, 
the  distance  is  about  269  J  miles,  and  the  rate  on  cattle  is  §35  per 
car,  on  wheat  23  cents  per  100  pounds,  and  on  corn  14  cents  per  100 
pounds;  while  the  distance  from  Topeka  to  Atchison  is  about  50J  miles, 
and  the  rates'are,  respectively,  §20,  9  cents,  and  8  cents.  It  will  be 
seen  that,  while  the  distance  from  Topeka  to  the  Missouri  river  is  only 
about  19  per  cent,  of  the  distance  from  Great  Bend  to  the  Missouri 
river,  the  Topeka  shipper  pays  about  57  per  cent,  as  much  on  cattle, 
about  40  per  cent,  as  much  on  wheat,  and  about  57  per  cent,  as  much  on 
corn  as  the  Great  Bend  shipper  pays*.  In  other  words,  while  Topeka 
pays  40  cents  per  mile  per  car  of  cattle,  Great  Bend  pays  but  13  cents 
per  mile  per  car;  while  Topeka  pays  3J  cents  per  ton  per  mile  on  wheat, 
Great  Bend  pays  but  1T7^  cents  per  ton  per  mile;  and  while  Topeka  pays 
3^-  cents  per  ton  per  mile  on  corn,  Great  Bend  pays  but  1  cent  per  ton  per 
mile  on  corn.  The  reasons  why  these  large  percentages  in  favor  of  the  ship- 
per for  long  distances  are  not  always  the  same  are  susceptible  of  explana- 
tion, and  have  been,  as  I  am  informed,  heretofore  set  forth  to  your  Board. 
The  percentages  in  favor  of  shippers  in  central  and  western  Kansas, 
compared  with  those  nearer  markets,  also  exist  in  a  similar  way  on  all 
freights  on  the  Atchison  road,  and  to  and  from  all  the  great  markets 
east,  with  which  nearly  all  Kansas  business  is  done. 

If  this  stock  was  driven,  or  if  this  freight  was  carried  by  wagons  or 
by  any  other  appliances  known  to  man,  it  would  cost  very  nearly  a 
given  price  per  ton  per  mile,  be  the  distance  long  or  short.  Thus  it 
will  be  seen  that  the  great  discrimination  which  nature  set  up  in  the 
way  of  the  settlers  of  the  more  remote  parts  of  Kansas,  but  which  did 
not  nevertheless  prevent  them  from  seeking  those  fields,  has  been  in 
great  part  already  removed  by  railroads  alone,  when  it  could  not  have 
been  removed  by  any  other  power.  And  further,  U  will  be  seen  that 
the  charges  made  by  the  Atchison  road  from  points  within  seventy 
miles  of  the  Missouri  river,  while  in  themselves  reasonable  as  stated  by 
the  Commissioners,  "judged  by  any  standard  of  comparison,"  are  still 
enormously  higher  in  proportion  to  the  distance  than  are  the  charges 
from  more  remote  sections  of  the  State. 

The  passenger  from  Coolidge,  Dodge  City,  Great  Bend,  or  Newton, 
pays  as  much,  mile  for  mile,  as  the  Topeka  or  Lawrence  passenger  pays, 
and  no  complaint  is  made.  In  the  early  history  of  railroading,  freight 
charges  were  made  on  the  same  basis,  but  steadily  year  after  year,  the 
railroads  have  thus  voluntarily,  even  on  local  freight  where  there  is  no 


13 

competition,  annihilated  distance,  and  placed  remote  sections  vastly 
nearer  markets  than  the  distance  away  would  justify  when  measured 
by  the  surveyor's  chain. 

RATES  FOR  EASTERN  AND  WESTERN  KANSAS. 

But  the  complainants  ask  the  road  to  place  them  still  nearer  the  Mis- 
souri river  compared  with  places  within  the  first  seventy  miles  of  the 
road;  and  it  is  found  that  local  rates  for  long  hauls  on  the  great  roads 
of  Illinois  are  lower  than  they  are  in  Kansas.  The  roads  of  Illinois 
have  always  insisted  that  their  rates  for  long  distances  were  placed  too 
low.  I  know  nothing  as  to  that,  but  if  there  are  not  good  resons  why 
the  Illinois  rates  should  be  lower  than  Atchison  rates  for  long  distances, 
then  the  Atchison  road,  I  have  reason  to  believe,  will  voluntarily  agree 
to  reduce  its  rates  accordingly. 

The  Atchison  company  did  not  fix  its  rates  on  the  first  seventy  miles 
of  its  road  as  low  as  Illinois,  and  for  longer  distances  somewhat  higher, 
simply  by  accident,  or  from  choice,  or  on  account  of  friendship  or 
enmity  to  any  part  of  the  State,  but  they  were  so  fixed  on  sound  busi- 
ness principles  and  from  necessity;  and  if  any  power  on  earth  can  be 
devised  to  remove,  or  evade,  or  still  further  reduce  the  discrimations 
set  up  by  nature,  it  will  be  as  much  for  the  interest  of  the  company  as 
for  its  patrons  that  it  be  at  once  employed. 

Almost  every  fact.advanced  to  prove  that  railroading  in  general  and 
for  all  distances  is  more  expensive  in  Kansas  than  in  Illinois,  applies 
with  greater  force  to  show  that  the  longer  distance  hauls  on  the  Atchi- 
son road  are  specially  expensive. 

First.  The  eastern  seventy  miles  of  the  State  is  more  than  four  times 
more  densely  populated  than  the  remainder  of  the  State.  There  is  no 
such  local  disparity  in  population  between  localities  in  Illinois  as  appears 
in  Kansas.  This  difference  in  population  not  only  indicates  to  some 
extent  the  difference  in  volume  of  business,  but  it  is  a  fact  which  will 
be  apparent  to  anyone  on  reflection,  that  all  the  large  number  of  ex- 
penses which  go  to  make  up  the  entire  cost  of  handling  a  business,  large 
or  small,  are  less  in  an  old-settled  and  densely-populated  country  than 
in  one  sparsely  populated. 

Second.  Every  great  road  in  Illinois  terminates  at  both  ends  on  navi- 
gable waters  and  at  great  trade  centers,  or  passes  through  great  trade 
centers  near  the  borders  of  the  State.  This  not  only  increases  the  aggre- 
gate volume  of  business,  and  reduces  the  expense  of  transacting  it,  but 
it  puts  all  parts  of  the  road  nearer  a  base  of  supplies,  a  factor  of  no 
small  importance,  as  before  shown.  If  St.  Louis,  with  its  markets,  its 
prices,  its  surroundings,  its  cheap  supplies  of  lumber,  railroad  ties,  iron 


14 

and  coal,  was  at  Coolidge  or  Dodge  City  instead  of  where  it  now  is, 
with  a  cheap,  direct  and  independent  water-route  outlet  to  all  the  great 
markets  of  the  world,  how  plainly  would  the  situation  be  reversed. 
With  a  rival  base  of  supplies  for  the  western  divisions  of  the  company, 
rival  markets  for  provisions,  live  stock  and  produce  at  various  points 
on  the  road,  this  long-haul  State  traffic  would  largely  become  short-haul 
traffic,  with  the  short-haul  prices  which  the  road  is  now  getting,  and 
which  are  conceded  to  be  fair. 

Third.  The  volume  of  business  on  the  Eastern  Division  of  the  road 
ending  at  Emporia,  is  enormous  compared  with  the  volume  of  business 
on  the  western  part  of  the  road.  For  example:  For  the  four  weeks  end- 
ing January  26,  1884,  there  originated  on  the  Eastern  Division  (about 
357  miles)  6,137  cars  of  freight,  and  on  the  other  625  miles  of  road  in 
the  State  only  2,737  cars.  While  each  mile  of  the  Eastern  Division 
furnished  17.2  cars  per  mile,  only  4.4  cars  per  mile  were  furnished  by 
the  western  divisions.  In  the  one  case  there  are  many  less  stations  to 
transact  a  much  larger  business;  the  help  is  employed  more  steadily ; 
there  is  less  loss  of  time;  the  cars  are  more  apt  to  be  loaded  to  their 
maximum  ;  there  is  less  empty-car  hauling,  as  there  is  more  return  busi- 
ness; and  there  are  many  other  tangible  elements  of  saving. 

In  short,  in  one  case,  it  is  a  condensed  wholesale  business,  transacted 
on  only  about  one-half  the  mileage,  with  a  corresponding  small  amount 
of  money  invested  in  the  roadbed,  and  with  every 'appliance  at  hand, 
compared,  in  the  other  case,  with  a  business  of  about  one- half  the 
amount,  scattered  over  about  twice  the  territory.  In  all  other  industries 
known  to  man,  it  would  be  regarded  as  just,  to  consider  these  elements 
of  cost,  and  there  is  no  reason  why  they  should  not  have  equal  weight 
in  the  present  case.  The  cost  of  one  mile  of  this  western  road  was 
about  the  same  as  a  mile  of  the  eastern  road,  and  by  far  the  greater 
expenses  of  sustaining  a  railroad  do  not  vary  with  the  amount  of  service 
rendered,  but  are  in  the  nature  of  what  are  known  as  "  fixed  charges/' 
such  as  taxes,  interest  on  cost,  and  maintenance  of  roadbed,  and  go  on 
year  after  year,  whether  more  or  less  business  is  done.  It  is  not  prac- 
ticable to  ascertain  the  exact  cost  of  business  on  each  of  the  two  great 
sections  of  road  above  named,  but  it  is  sufficiently  clear,  from  a  com- 
parison of  the  sura  of  those  distances,  and  a  comparison  of  the  relative 
amount  of  business  in  each  case,  and  of  the  rates  charged  per  ton  per 
mile  in  each  case,  that  if  there  has  been  any  discrimination  shown  by 
the  company,  it  has  been  in  favor  of  the  western  part  of  the  State. 

Fourth.  An  ordinary  heavy  freight  engine  can  haul  on  an  average 
fifty  loaded  freight  cars  from  Topeka  to  Kansas  City,  the  terminus  to 
which  the  greater  part  of  all  shipments  are  made,  while  the  same  engine 


15 

can  haul  on  an  average  only  eighteen  loaded  cars  from  Eraporia  to 
Topeka,  and  only  twenty-five  loaded  cars  from  Nickerson  to  Emporia. 
A  mere  statement  of  this  fact  renders  comment  unnecessary. 

The  Atchison  company  should  not  be  held  responsible  for  the  hills 
encountered  in  Osage  and  Lyon  counties,  nor  for  the  hills,  only  a  little 
less  prominent,  still  further  west;  although  it  has  reduced  them  as 
much  as  is  practicable,  at  great  cost  and  labor. 

COMPARISONS  WITH  OTHER  STATES. 

Having  stated  some  of  the  reasons  why  railroad  rates  in  Illinois  can 
be  made  lower  than  in  Kansas,  it  will  be  proper  to  institute  a  few  ad- 
ditional comparisons  with  roads  whose  cost  of  business  is  more  on  an 
equality  with  the  cost  of  business  in  this  State,  and  I  herewith  submit 
to  the  "Board  of  Commissioners  for  examination  and  comparison  tabu- 
lated and  authenticated  schedules  of  the  rates  which  prevail  on  a  num- 
ber of  well-known  roads,  located  in  sections  of  the  country  where  the 
surroundings,  business  and  conditions  are  nearest  like  those  of  the  Atchi- 
son road. 

The  Board  will  find  that  the  rates  on  the  eastern  divisions  of  the 
Northern  Pacific  road  average  from  20  to  90  per  cent,  higher  than 
those  of  the  schedule  on  which  the  Atchison  company  has  done  the 
greater  part  of  its  business  in  this  State. 

The  schedules  in  force  on  some  of  the  chief  roads  in  Nebraska,  a  State 
where  the  Legislature  has  assumed  the  power  to  regulate  rates  in  part 
at  least,  range  from  20  to  60  per  cent,  higher  on  nearly  all  classes  of 
freight  and  for  nearly  all  distances,  than  the  Atchison  local  tariff. 

The  Milwaukee  &  St.  Paul  schedule  for  Iowa  State  business  aver- 
ages about  the  same  as  the  Atchison  schedule  on  produce  and  livestock, 
while  it  is  somewhat  lower  on  merchandise  for  long  distances,  and 
higher  for  short  distances. 

The  inter-state  tariffs  of  this  road,  and  of  the  Chicago  &  Northwestern 
road,  and  of  the  Chicago,  Rock  Island  &  Pacific  road,  which  tariffs  also 
govern  business  between  points  in  Minnesota,  range  decidedly  higher  than 
the  Atchison  tariff  for  corresponding  business. 

Rates  on  the  Burlington  &  Missouri  River  road  in  Nebraska,  on  the 
great  bulk  of  business,  average  from  10  to  20  per  cent,  higher  than  the 
Atchison  rates. 

The  distance  tariffs  of  the  Missouri  Pacific  road  and  of  the  St.  L  >uis 
&  San  Francisco  road,  when  applied  to  terminal  business,  are  noticeably 
higher  than  these  tariffs  for  corresponding  business.  Lumber,  it  is 
true,  is  lower  per  hundred  pounds  in  Missouri,  but  Missouri  lumber 
consists  mostly  of  heavy  pitch-pine  and  oak,  and  the  difference  would 


16 

disappear  when  compared  per  thousand  feet  with  soft  lumber.  The 
Missouri  Pacific  inter-state  tariff,  for  most  of  its  system,  is  very  much 
higher  than  the  Atchisou  tariff.  On  no  class  of  articles  are  the  Atchison 
rates  higher  than  the  rates  which  prevail  on  the  great  Louisville  & 
Nashville  road,  and  for  most  classes  they  are  noticeably  lower.  The 
Louisville  &  Nashville  tariff  has  been  approved  by  the  State  Commis- 
sioners of  Alabama  as  reasonable  for  the  roads  of  that  State,  as  evidence 
herewith  submitted  shows.  Moreover,  on  this  road  and  on  most  other 
roads  where  these  comparisons  are  made,  it  is  customary  to  make  the 
charge  for  shipments  from  points  on  their  leased  lines  to  points  on  the 
main  line,  and  vice  versa,  equal  the  sum  of  the  two  rates,  which  still 
increases  the  charges,  a  practice  which  never  prevailed  on  the  Atchison 
system. 

The  Atchison  local  rates  average  lower  than  the  rates  of  the  Mis- 
souri, Kansas  &  Texas  road,  and  also  lower  than  the  rates  of  the  St. 
Paul,  Minneapolis  &  Manitoba,,  a  road  running  into  the  heart  of  the 
great  Red  river  wheat  regions.  The  same  holds  true  with  the  Han- 
nibal &  St.  Joe  rates. 

The  rates  prescribed  by  law  in  Wisconsin  on  most  shipments,  nota- 
bly on  live  stock  and  produce,  are  from  10  to  30  per  cent,  higher 
than  Atchison  rates.  Some  of  the  above  tariffs,  though  in  name  dis- 
tance tariffs,  are  in  fact  combination  tariffs,  under  which  all  business 
of  the  respective  roads  to  terminal  points  is  transacted,  as  for  instance 
to  St.  Louis;  and  taking  into  account  the  small  amount  of  business  be- 
tween intermediate  points,  such  tariffs  should  be  more  properly  com- 
pared with  the  Atchison  rates  to  and  from  Missouri  river  points. 

But  it  should  be  remembered  that  the  greater  part  of  the  so-called 
State  business  of  the  Atchison  road  is  in  fact  inter-state  business,  ter- 
minating at  Kansas  City,  in  Missouri,  over  which  Kansas  has  no  control. 
Now,  when  the  inter-state  tariffs  of  the  great  roads  in  the  west  are 
compared  with  the  rates  which  the  Atchison  road  has  been  receiving 
for  this  inter-state  business,  the  difference  is  still  more  largely  in  favor 
of  the  Atchison  rates.  True,  there  is  a  class  of  inter-state  business 
moving  in  large  volumes  from  competitive  points  on  the  Missouri  and 
Mississippi  rivers,  or  from  points  on  the  Great  Lakes  to  the  Atlantic  sea- 
board, which  is  not  done  in  the  main  under  the  above  inter-State  tariffs, 
but  which  is  moved  at  any  price  which  may  be  forced  upon  the  roads, 
provided  it  is  a  little  above  the  naked  cost  of  the  train  service,  as  here- 
inbefore explained. 

A  reference  to  the  census  returns,  and  to  Poor's  Manual,  will  show 
that  Wisconsin,  Iowa,  Missouri,  Arkansas  and  Tennessee,  where  these 
State  and  inter-state  tariffs  take  effect,  are  much  older  States  than 


17 

Kansas,  and  have  a  greater  density  of  population  per  square  mile  than 
Kansas,  and  also  a  larger  population  per  mile  of  railroad  than  Kansas; 
and  there  can  be  no  doubt,  as  before  stated,  that  the  lower  rates  which 
Kansas  has  enjoyed,  compared  with  these  States,  accounts  in  part  at 
least  for  the  financial  failure  of  so  many  Kansas  roads,  and  also  in  part 
for  the  recent  and  present  more  rapid  development  of  Kansas  than  of 
other  and  new  States  like  Minnesota  and  Nebraska.  The  statistics  of 
these  States,  all  of  which  are  old-settled  States  compared  with  Kansas, 
and  all  of  which  admit  of  a  greater  uniformity  of  settlement  than  Kan- 
sas, are  as  follows: 


STATES. 

Population 
per 
square  mile. 

Population 
per  mile 
of  railroad. 

29 

234 

33 

482 

37 

746 

15 

523 

24 

344 

12 

234 

Minnesota  and  Nebraska,  though  settled  as  early  or  earlier  than 
Kansas,  and  similarly  situated  with  reference  to  the  capacity  for  uni- 
form settlement,  have  not  advanced  as  rapidly  in  population  as  Kansas, 
and  the  greatest  known  factor  in  this  difference  is  the  lower  rates  which 
Kansas  has  enjoyed.  It  will  be  found  that  wherever  comparisons  are 
made  with  a  fair  understanding  of  the  surroundings  and  conditions,  the 
conclusion  is  clearly  in  favor  of  the  view  that  Kansas  has  enjoyed  rea- 
sonable rates.  Minnesota,  Nebraska  and  Texas  are  the  only  States  sit- 
uated like  Kansas  for  purposes  of  comparison  of  rates.  Wisconsin, 
Iowa,  Missouri  and  Arkansas  are  more  favorably  situated  as  to  popula- 
tion, volume  of  local  business,  convenience  to  base  of  supplies,  etc. 
But  the  above  four  States  are  all  about  equally  distant  from  a  base  of 
supplies,  are  all  somewhat  densely  populated,  for  suchi  new  States,  in 
their  eastern  parts,  and  all  extend  out  onto  the  Plains  in  a  similar  way. 
Still,  if  the  eight  States  are  taken  together,  it  will  be  found  that  local 
business  on  the  Atchison  system  is  and  has  been  done  at  decidedly  the 
lowest  rates. 

Comparisons  have  been  made  of  charge  per  ton  per  mile  of  the  total 
traffic  of  the  Atchison  road  for  the  year  1883  with  the  charge  per  ton 
per  mile  on  the  total  traffic  of  certain  great  roads  entering  Chicago,  whose 
business  is  confined  almost  exclusively  to  the  States  of  Illinois,  Iowa, 
Missouri,  Wisconsin,  and  Minnesota. 

The  unfairness  of  this  test  will  be  conceded  when  it  is  remembered 
that  more  'than  one-half  of  the  Atchison  system  extends  over  plains, 


18 

deserts  and  mountains  which  furnish  a  meager  business,  and  where  the 
necessary  high  charges  per  ton  per  mile  go  to  make  up  a  much  higher 
charge  per  ton  per  mile  on  the  total  traffic  than  would  be  the  case  if 
business  in  the  State  of  Kansas  alone  was  taken  into  account. 

The  fact  that  certain  points  in  central  and  western  Kansas  furnish 
only  two,  three  or  four  articles  to  ship  in  any  quantity,  for  example, 
wheat  and  live  stock,  or  corn  and  livestock,  and  that  New  Mexico  fur- 
nishes only  two  articles  in  any  quantity,  to  wit,  silver  ores  and  wool, 
has  been  set  up  as  a  reason  why  the  road  should  make  the  rates  on  those 
articles  very  low,  in  the  interest  of  the  producers  of  the  same.  So  the 
road  would  no  doubt,  if  it  were  possible,  but  the  very  fact  of  there  be- 
ing no  diversity  of  production  renders  the  transaction  of  what  business 
there  is  more  expensive  for  the  road. 

If  agriculture  flourished  in  New  Mexico  along  with  its  mines,  or  if 
mining  or  manufactures,  or  even  a  more  diversified  agriculture  existed 
among  the  farmers  of  western  Kansas,  the  entire  traffic,  as  can  readily 
be  seen,  could  be  disposed  of  on  a  lower  scale  of  rates  than  at  present. 

Another  mistaken  idea  has  been  advanced  in  connection  with  these 
hearings,  namely,  that  the  percentage  in  decrease  of  rates  should  equal 
the  percentage  in  increase  of  business.  Now  no  doubt  the  cost  of  mov- 
ing freight,  that  is  the  naked  train  expenses,  does  decrease  in  such  ratio, 
or  perhaps  in  greater  ratio;  but  about  50  per  cent,  of  the  entire  amount 
of  all  rates  goes  to  pay  the  fixed  charges  of  the  road,  such  as  interest 
and  taxes.  These  fixed  charges  cannot  be  diminished,  however  large 
the  traffic.  If  the  business  should  increase  100  per  cent,  and  the  rates 
should  decrease  100  per  cent.,  the  goods  would  go  for  nothing. 

FACTS  TO  BE  CONSIDERED  IN  DECIDING  THE  QUESTION  OF 
SEASONABLE  PKOFITS. 

It  must  be  conceded  that  it  is  a  business  problem  of  great  magnitude, 
to  determine  whether  the  power  of  this  road  to  earn  receipts  should  re- 
main where  it  is,  or  whether  it  should  be  abridged,  and  if  abridged,  to 
what  extent;  also,  whether  this  power  should  be  exercised,  if  at  all,  by 
the  Federal  Government  on  inter-state  commerce,  or  by  which  one  of 
the  seven  States  and  Territories  into  which  the  system  extends. 

No  business  problem  of  this  magnitude  can  be  rightfully  treated  with- 
out a  knowledge  of  its  surroundings  and  history.  It  will  therefore  be 
necessary  to  allude  briefly  to  a  few  general  and  controlling  features 
which  govern  the  present  situation.  The  company  which  built  up  this 
great  system  of  roads  in  a  field  where  all  other  railroad  efforts  had 
failed,  and  in  a  country  where  no  similar  effort  has  succeeded  to  the  same 
extent  under  like  circumstances,  has  constantly  kept  in  view  the  im- 


19 

portance  of  imposing  its  necessary  burdens  among  these  seven  political 
divisions  in  the  most  equitable  manner,  to  the  end  that  each  should  bear 
only  its  due  share;  and  this  by  the  aid  of  skilled  and  experienced  agents, 
many  of  whom  have  grown  up  with  the  road,  and  whose  duties  enable 
them  to  examine  the  entire  field  to  the  best  advantage.  But  with 
Kansas  as  its  base  of  operations,  there  can  be  no  doubt  that  it  has, 
necessarily  in  many  cases  and  voluntarily  in  other  cases,  conferred  upon 
this  State  vastly  more  incidental  benefits,  in  proportion  to  its  Kansas 
receipts,  than  it  could  have  done  had  the  system  been  built  only  to  the 
west  line  of  the  State,  and  also  vastly  more  than  it  has  been  able  to 
confer  upon  the  States  and  Territories  farther  west. 

This  was,  to  some  extent,  the  inevitable  result  of  the  situation,  but 
to  a  greater  extent  it  was  the  result  of  the  mutual  friendship  and  har- 
mony of  the  people  and  the  company,  both  working  for  the  same  re- 
sult—  the  development  of  the  State  and  the  enhancement  of  all  values. 
The  benefits  thus  conferred  are  seen  from  the  east  to  the  west  line  of 
the  State,  in  substantial  fences,  bridges  and  roadbed,  in  superior  equip- 
ment, and  in  commodious  roundhouses,  depots,  offices,  machine  and 
repair  shops.  Improvements  of  this  character  have  not  been  made 
solely  from  selfish  considerations,  for  they  are  of  equal  value  to  the 
patrons  of  the  road,  as  promoting  the  comfort,  convenience,  certainty 
and  safety  of  travel  and  business,  to  the  communities  among  whom  the 
money  for  their  construction  was  distributed,  and  to  the  road  itself. 

Your  commission  has  heard  the  complaints  and  seen  the  effects  on  a 
community  of  a  poor  road  in  bad  repair,  and  can  appreciate  the  differ- 
ence in  value  to  the  people  of  a  well-preserved  compared  with  a  de- 
crepid  railroad.  Every  intelligent  community  requires  its  railroads  to 
be  kept  up  abreast  of  the  times,  knowing  that  in  the  end  it  can  thus  do 
business  cheaper,  with  more  satisfaction  to  all  parties,  and  assist  the 
growth  of  their  country. 

While  the  rates  in  various  States  and  Territories  of  this  system  have 
been  adjusted  as  nearly  as  possible  with  reference  to  the  actual  cost  in 
each  case  of  rendering  the  service,  it  can  readily  be  seen  that  Kansas 
has  been  largely  favored  as  the  recipient  of  incidental  benefits,  and  it  is 
a  notorious  fact  that  the  management  of  the  road  have  always  given 
Kansas  the  benefit  of  a  doubt  in  these  respects,  and  spent  large  amounts 
of  money  in  helping  to  build  up  the  State  when  it  might  with  more 
propriety  have  gone  elsewhere. 

Two  conclusions  result  from  this  state  of  facts: 

First.  It  is  fair  to  presume  that  a  State  thus  voluntarily  favored  in 
these  respects  has  been  at  least  put  on  an  equality  in  the  way  of  rates 
with  the  other  States  and  Territories  and  with  inter-state  business,  and 


20 

the  records  of  the  company  confirm  this  presumption  to  an  extent  little 
understood  by  the  people  of  Kansas. 

Second.  That  common  fairness  and  public  policy  require  that  an  en- 
terprise which  came  into  the  State  at  the  unanimous  request  of  the 
people,  which  has  performed  its  service  at  rates  which  have  from  time 
to  time  been  voluntarily  and  largely  cut  down,  and  which  has  con- 
ferred such  valuable  incidental  benefits,  should  at  least  be  allowed  to 
hope  for  profits  equal  to  the  best  that  can  be  expected  from  enterprises 
of  less  public  benefit,  such  as  loaning  money  on  mortgage,  and  invest- 
ments in  real  estate. 

It  should  also  be  remembered,  that  each  of  the  other  six  States  and 
Territories  embraced  in  the  Atchison  system  may  claim  the  same  right 
to  cut  down  charges  after  the  system  of  rates  has  once  been  broken  into 
by  the  State  of  Kansas;  and  also  that  the  Federal  Government  is 
threatening  in  like  manner  to  cut  down  inter-state  charges,  and  already, 
only  a  few  days  ago,  a  bill  passed  one  branch  of  Congress  reducing  by 
one-half  the  regular  charges  for  carrying  the  United  States  mails  on  the 
Atchison  road.  It  would  be  an  act  of  common  justice  between  sister 
States  and  Territories,  and  it  would  distribute  the  inevitable  burdens  of 
life  more  equitably  and  protect  the  future  usefulness  of  this  great  prop- 
erty, to  have  whatever  reductions  future  developments  may  show  to  be 
possible  made  uniformly  and  by  the  road,  with  all  things  considered, 
rather  than  to  have  the  system  broken  in  upon  by  one  State  or  Territory, 
without  regard  to  the  condition  or  rights  of  the  others. 

Looking  over  the  history  of  the  State  and  the  history  of  the  road,  the 
relations  of  the  two,  and  the  reductions  of  the  past,  there  can  be  no  dan- 
ger that  Kansas  rates  will  suffer  in  the  future  by  comparison  with  the 
others. 

Again,  it  is  a  principle  of  political  economy,  everywhere  recognized 
as  based  upon  common  sense,  that  every  financial  enterprise  should  have 
an  opportunity  for  profits,  if  it  succeeds,  corresponding  to  the  risks 
which  it  assumes.  Without  such  fair  corresponding  chances,  all  pro- 
gress would  cease,  and  a  dead  level  of  inaction  would  stay  the  advance 
of  civilization.  Now,  it  is  a  notorious  fact  that,  as  a  whole,  there  have 
been  immensely  larger  losses  and  bankruptcies  in  railroad  investments 
in  Kansas  than  in  any  other,  class  of  business.  The  ardent  projectors 
under-estimated  the  cost  of  the  roads;  they  over-estimated  the  business; 
they  built  ahead  of  the  times;  they  were  urged  on  to  their  work  by  the 
united  voice  of  the  people;  they  failed  to  discount  the  drouth  and  other 
scourges  which  subsequently  visited  the  State;  and  they  were  offered  a 
a  charter  which  conceded  to  them  the  privilege  of  making  their  own 
rates,  which  charter  at  the  time  everyone  believed  to  be  a  valid  con- 


21 

tract,  under  the  Dartmouth  College  decision  of  the  Supreme  Court  of 
the  United  States. 

It  will  be  seen  that  the  risks  were  enormous,  and  the  signal  and 
almost  uniform  failures  confirm  this  fact.  I  do  not  refer  to  this  for  the 
purpose  of  entering  up  a  claim  for  corresponding  profits,  as  might  well 
be  done,  but  this  matter  of  public  history  is  an  element  which  common 
justice  requires  should  not  be  lost  sight  of  in  approaching  the  question 
of  profits. 

There  is  no  doubt,  also,  but  that  public  policy  requires  that  enter- 
prises should  be  encouraged  in  proportion  to  the  benefits  which  they 
confer  on  the  people.  An  enterprise  of  doubtful  moral  tendencies,  or 
which  draws  its  sustenance  without  dispensing  public  benefits,  should 
be  treated  by  the  law  with  a  jealous  hand.  Now  railroads,  as  was  once 
stated  by  this  Board,  "have  done  more  perhaps  towards  securing  to 
this  State  its  present  prosperity  than  all  other  enterprises  combined," 
and  judged  by  this  test  should  be  allowed  corresponding  profits  com- 
pared with  any  and  all  other  investments. 

Again,  whether  a  railroad  property  or  any  other  property  deserves 
to  have  its  receipts  increased  or  diminished,  is  a  question  not  dependent 
solely,  or  even  mainly,  on  the  dividends  which  may  have  been  declared 
for  a  short  period  of  time,  but  it  depends  in  a  large  degree  upon  the 
chances  for  earnings  and  net  profits  in  the  future.  In  the  present  case 
the  opinion  of  the  investing  public  at  a  time  when  capital  is  seeking 
investments,  is  on  record  in  the  fact  that  Atchison  stock  is  openly  sell- 
ing at  from  seventy-five  to  eighty  cents  on  the  dollar,  while  other  roads 
further  east,  paying  the  same  dividends,  but  whose  future  is  deemed 
more  assured,  sell  at  par  or  largely  above  par. 

The  past  five  years  have  been  years  of  exceptional  prosperity  and 
activity,  especially  for  railroads.  Nothing  like  it  was  ever  before  known. 
A  wonderful  business  impetus  seized  hold  of  the  people  after  the  pre- 
ceding season  of  depression,  and  at  least  an  ordinary  decade  of  business  * 
advance  was  crowded  into  one-half  of  the  usual  time.  The  Atchison 
road  has  shared  in  this  prosperity.  It  received  large  sums  of  money 
for  carrying  the  railroad  material  which  this  company  and  other  friendly 
companies  were  constructing  in  far  distant  localities  during  these  pros- 
perous years. 

This  freight  money  did  not  come  from  the  pockets  of  the  people  on 
the  line,  but  from  the  construction  account  of  the  new  roads.  These 
roads  are  now  nearly  all  completed.  It  would  be  an  exception  to  all 
history  if  the  law  of  reaction  was  not  now  felt.  The  only  question  is 
as  to  its  severity.  Exceptional  crops  in  Kansas,  and  exceptional  efforts 
on  the  part  of  the  railroads,  combined  with  a  partial  failure  in  other 


22 

States,  will  enable  this  State,  we  hope,  to  make  a  good  showing  again 
this  summer.  If  this  development  can  be  continued  in  the  future,  so- 
much  the  better  for  the  State  and  the  company,  and  freight  rates  should 
then  be  and  no  doubt  would  be  made  accordingly. 

But  the  history  of  Kansas  and  of  the  road   for  the  ten  years  imme- 
diately preceding  this  last  era  of  five  years,  taken   in  connection  with 
the  ordinary  reaction  which   follows  in  the  wake  of  such  a  wave  of  in- 
dustrial activity,  demands  that  such  an  enterprise  upon  which  so  much 
and  so  many  depend  should  be  conducted  upon  conservative  principles. 
The  processes  of  a  great  and  far-reaching  enterprise  like  this  should  be 
like  the  processes  of  nature,  gradual  but  reliable,  and  eager  haste  in  the 
one  case,  like  a  hot -bed  method  in  the  other,  may  not  prove  best  for  the 
railroads,  for  the  State  as  a  unit,  or  for  the  people.     We  do  not  wish  to 
predict  drouth,  distress  or  any  scourge  of  nature.    They  are  bad  enough 
when  they  arrive,  but  common  prudence,  when  the  hopes  and  subsistence 
of  so  many  thousands  are  bound  up  in  an  enterprise,  requires  a  reason- 
able preparation  for  that  reaction  which  all  experience  shows  will  come- 
in  a  greater  or  less  degree. 

Railroad  business  is  also  peculiar  in  this:  Other  business  enterprises- 
have  the  privilege  of  accumulating  the  largest  amount  possible  in  times- 
of  prosperity,  unrestricted  by  law,  and  if  a  dull  time  comes  in  that  par- 
ticular line,  they  have  a  margin  of  profit  on  which  to  reduce  prices,  or 
they  can  change  into  other  business,  or  if  needs  be,  shut  down  for  the 
time  being  without  special  loss,  and  start  up  again  at  any  time,  not  limited 
as  to  prices  except  by  competition.  But  when  any  general  decline  i& 
made  in  railroad  rates,  if  continued  for  any  length  of  time  as  a  basis  on 
which  to  sustain  the  road,  experience  shows,  as  this  Board  is  aware,  how 
difficult  it  is  ever  again  to  make  a  general  advance,  however  just  and 
necessary  it  may  be  that  the  advance  should  be  made.  It  is  difficult  to- 
even  adjust  or  level  up  a  rate  on  a  particular  article  at  a  particular  town, 
when  by  accident  it  has  been  thrown  out  of  its  true  relation  to  other  rate* 
at  other  towns.  Suppose  rates  on  the  Atchison  road  should  now  be  cut 
down  on  the  basis  of  the  present  business  and  present  expenses  of  the 
road,  so  as  to  cut  off  or  materially  interfere  with  the  present  moderate 
surplus  which  the  company  is  endeavoring  to  provide  during  these  pros- 
perous times,  after  paying  its  dividend  of  six  per  cent.,  then  what 
would  follow  in  the  not  improbable  event  of  other  States  and  Ter- 
ritories cutting  down  rates,  or  of  the  Federal  Government  interfering 
with  its  inter-state  commerce,  or  of  a  business  reaction  setting  in,  or 
of  drouth  or  distress  of  any  kind  affecting  the  people,  or  of  the  roads 
being  stricken  with  floods,  or  disaster,  or  accidents  involving  loss  of  life 
and  property,  from  which  this  road  has  been  so  free  for  the  past  few  years,. 


23 

but  which  are  so  imminent  on  a  line  of  road  of  nearly  2,000  miles.  As 
an  example,  during  the  past  month,  a  railroad  connecting  with  the 
Atchison  system  lost  a  sum  estimated  at  from  five  hundred  thousand  to 
one  million  of  dollars  as  the  damage  inflicted  by  a  few  heavy  rains  in 
Arizona  and  southern  California,  while  the  well-known  Ashtabula  dis- 
aster cost  the  Lake  Shore  road  in  direct  damages  about  one  million  of 
dollars. 

The  road  cannot  insure  itself  against  these  losses,  and  the  State  will 
not  insure  it  against  them.  It  cannot  advance  its  rates  during  a  public 
distress,  or  during  its  own  distress,  above  what  the  public  are  ac- 
customed to.  It  cannot  change  its  business,  and  it  cannot  go  out  of 
business.  It  will  be  seen  that  it  absolutely  has  no  recourse  in  events  of 
the  most  probable  character  and  within  the  range  of  the  most  common 
experience,  unless  it  be  allowed  to  accumulate  a  reasonable  surplus  in 
prosperous  years. 

It  cannot  be  presumed,  when  this  whole  subject  is  examined  on  busi- 
ness principles  and  in  view  of  all  the  facts,  that  either  the  people  or  the 
State  will  deem  it  just  to  place  an  enterprise  wtyich  has  been  such  a 
great  benefactor  to  the  State,  directly  and  indirectly,  in  so  close  a  place, 
with  the  odds  all  against  it,  as  though  it  were  a  malefactor  or  a  public 
^nemy;  neither  can  it  be  presumed  that  the  people  or  the  Board  of 
Commissioners  ever  so  intended. 

In  determining,  then,  the  question  of  what  now  constitutes  fair  pro- 
fits, these  material  elements  of  the  problem  must  be  taken  into  account: 

First.  Railroads  have  conferred  more  benefits  upon  the  State  than  all 
other  causes  combined. 

Second.  While  performing  its  regular  duties  to  the  public,  the  Atchi- 
fion  road  has  also  conferred  upon  the  State  incidental  benefits  of  great 
value,  and  more  than  its  Kansas  business,  compared  with  its  entire  busi- 
ness, would  justify. 

Third.  One  State  or  Territory  should  not  cut  off  receipts,  unless  all 
the  other  political  powers  having  jurisdiction  could  at  the  same  time 
cut  off  receipts  to  an  equal  extent,  and  then  leave  the  company  its  fair 
margin  of  profit.  The  burdens  at  present  being  uniformly  distributed 
and  divided  upon  principles  of  equity,  they  should  remain  uniform. 

Fourth.  Profits  should  be  allowed  in  view  of  the  enormous  risks 
which  were  incurred  —  risks  which  for  several  years  threatened  to  over- 
whelm the  entire  property,  and  during  which  the  stock  became  worth- 
less, and  the  first-mortgage  bonds  sold  for  less  than  one-half  their  cash 
cost. 

Fifth.  Whether  receipts  should  be  cut  down  depends  not  entirely  or 
mainly  upon  the  immediate  profits  made  during  a  period  of  exceptional 


24 

prosperity,  during  which  all  other  profits  and  increase  of  values  were  also- 
large,  but  upon  the  future  chances,  examined  in  the  light  of  the  past 
history  of  this  company  and  of  such  enterprises. 

Sixth.  Reductions  cannot  be  made  with  a  view  of  again  making  advan- 
ces in  the  event  of  the  enterprise  becoming  unprofitable.  A  step  which 
cannot  be  recalled  if  it  proves  unwise,  should  be  taken  with  great  cau- 
tion, especially  if  it  seriously  affects  an  important  and  deserving  inter- 
est. 

The  considerations  above  presented  are  based  upon  the  theory  that 
the  business  of  this  Atchisou  railroad  was  business  lying  within  the 
State  of  Kansas  only  —  business  which  arose  out  of  and  was  dependent 
entirely  upon  the  State  development;  but  when  we  come  to  view  the  real 
facts  in  the  case  in  connection  with  the  business  of  this  great  through 
line,  we  are  forced  to  the  conviction  that  legislation  which  is  aimed  at 
the  profits  of  such  an  enterprise  as  this,  is  the  most  unwise  legislation 
which  the  State  could  enact,  because,  in  striking  at  the  results  of  such 
an  enterprise  as  this,  the  same  blow  is  also  struck  at  the  direct  material 
interests  of  the  State  itself.  A  clear  exemplification  of  this  fact  is  given 
in  the  following  figures,  showing  the  source  from  which  the  freight  traf- 
fic of  this  Atchison  road  sprung  in  1882: 

The  accounts  and  figures  for  the  year  1883  are  not  yet  made  up.  The 
freight  earnings  of  1883  were  nearly  $200,000  less  than  in  1882,  so  I 
give  you  the  facts  for  1882  as  made  up  by  the  General  Auditor  of  the 
Atchison  road,  as  closely  as  he  can  figure  them,  it  being  difficult  to  get 
the  figures  right  to  the  last  dollar,  as  the  road  is  operated  as  a  whole  in 
all  the  States  and  Territories.  In  1882  the  total  freight  earnings  of  the 
Atchison  system  of  roads  in  Kansas,  Colorado,  New  Mexico,  Missouri 
and  Texas,  consisting  of  1,820  miles,  was  $10,537,201.57.  Of  this  sum, 
the  money  earned  on  that  portion  of  the  road  in  Kansas,  and  a  few 
miles  in  Missouri,  consisting  of  912.10  miles,  was  $6,319,787.01.  This 
was  the  entire  freight  money  earned  on  the  business  transported  in  Kan- 
sas, whether  it  was  going  only  across  Kansas,  or  between  two  Kansas 
points,  or  going  to  and  from  Kansas  points  to  and  from  points  in  other 
States.  This  sum  was  earned  as  follows  : 

On  business  between  two  points,  both  being  in  Kansas $1,325,192  20 

On  bustuess  to  or  from  Kansas  points,  and  going  to  or  from  points  in  the  States  east  of 

Kansas 1,817,686  1& 

On  business  to  or  from  Kansas  points,  and  going  to  or  from  points  in  States  and  Terri- 
tories west  of  Kansas 519,298  56 

On  business  to  or  from  one  foreign  State  or  Territory  going  to  or  from  another  State  or 

Territory,  and  hence  only  going  across  Kansas 2,657,610  09 

Total 86,819,787  01 

As  the  courts  have  decreed  that  legislation  on  railroad  tariffs  covers 
only  business  lying  within  the  State,  it  will  be  readily  seen  that  any  leg- 


25 

islation  enacted  would  cover  only  about  one-fifth  of  the  freight  traffic 
of  this  through  line.  Another  glance  at  these  figures  will  show  that 
nearly  one-half  of  the  entire  freight  traffic  of  the  road  consists  of  busi- 
nesssiraply  brought  across  the  State  —  business  which  uses  Kansas  simply 
as  a  bridge,  but  which  while  passing  over  the  bridge  leaves  one-half  of 
the  money  earned  upon  the  traffic  to  be  distributed  along  the  line,  in 
the  way  of  expenses  incurred  for  conducting  the  traffic.  The  aim  of 
the  State,  then,  should  be  to  do  everything  in  reason  to  advance  and 
build  up  this  class  of  traffic,  so  that  it  may  come  across  the  State  of 
Kansas  instead  of  going  in  other  directions,  and  the  greatest  degree  of 
profit  made  by  the  railroad  company  upon  this  class  of  business,  means 
a  proportionately  large  degree  of  benefit  conferred  upon  the  State  itself. 

The  duty  of  the  road  towards  the  State,  as  based  on  common-law  prin- 
ciples, is,  to  afford  to  the  citizens  of  the  State  living  on  its  line  a 
reasonable  system  of  rates  for  the  traffic  produced  by  those  citizens. 
That  that  has  been  fully  done,  we  think  has  been  established  by  the 
figures  here  presented. 

It  follows  that  the  interest  of  the  State  is  to  allow  the  owners  to 
make  the  railroad  as  largely  profitable  as  the  energy,  intelligence  and 
enterprise  of  those  owners  may  enable  them  to  accomplish. 

It  is  possible  that  the  public,  in  some  parts  of  the  country,  may  have 
been  misinformed  upon  this  subject,  as  it  appears  that  they  were  some 
years  ago  upon  a  subject  somewhat  similar.  It  will  be  remembered  that 
a  great  deal  of  excitement,  extending  through  a  number  of  years,  pre- 
vailed almost  everywhere  among  producers  over  the  alleged  extortions 
of  "middle  men,"  a  term  which  was  applied  to  the  dealers  in  mer- 
chandise, groceries,  produce,  etc.  Cooperative  stores  were  established,, 
and  the  matter  was  very  fully  discussed  and  tested,  and  many  advocated 
a  resort  to  some  legal  measure. 

A  full  investigation  brought  out  all  the  facts,  and  it  finally  became 
known  to  all,  that  competition  was  so  intense  that  only  the  most  careful 
and  industrious  traders  succeeded,  and  that  the  percentage  of  failures  i» 
that  business  was  as  large  as  in  any  other. 

On  any  complicated  subject  of  this  character,  it  seems  that  discussion 
and  investigation  will  finally  bring  the  ultimate  facts  to  the  surface;  and 
in  the  end  all  parties  are  thus  benefitted. 


LAND-GRANT  STATEMENT. 


So  much  has  been  said  in  regard  to  the  land  grant  of  the  Atchison, 
Topeka  &  Santa  F6  Railroad,  that  an  analysis  of  the  grant  has  been 
made,  and  is  herewith  given. 

The  Atchison,  Topeka  &  Santa  F6  Railroad  received  through  the  State 
of  Kansas  from  the  General  Government,  a  land  grant  consisting  of 
2,934,584.04 , acres  of  land.  When  the  construction  of  the  road  was 
begun  by  the  original  projectors,  it  was  found  that  investors  were  un- 
willing to  purchase  first-mortgage  bonds  of  the  road  to  a  greater  amount 
than  $16,000  per  mile;  and  the  actual  cost^of  the  road  being  very  much 
in  excess  of  this  amount,  it  was  found  that  the  only  means  remaining  to 
the  company  for  obtaining  the  necessary  money  to  complete  the  road, 
was,  to  borrow  the  additional  funds,  using  the  land  grant  as  a  security. 
In  consequence  of  this  determination,  the  sum  of  $3,520,000  was  bor- 
rowed, and  the  land  grant  given  as  security  therefor,  and  this  $3,520,000 
was  used  in  completing  and  equipping  the  railroad  extending  from 
Atchison  to  the  west  line  of  the  State. 

It  will  be  remembered  that,  after  the  road  was  completed,  and  even 
•during  the  time  of  its  construction,  times  were  hard  and  the  railroad 
earnings  were  small.  The  land  sales  were  also  very  small,  and  even 
upon  such  sales  as  were  made  the  amount  of  money  which  was  collected 
was  small.  The  consequence  was,  that  when  the  interest  upon  the  land 
mortgage  fell  due,  amounting  to  about  $250,000  a  year,  there  were  no 
moneys  from  the  land  grant,  nor  even  from  the  railroad,  to  meet  the 
interest,  and  in  order  to  prevent  the  foreclosure  of  the  mortgage,  the 
railroad  company  and  the  land  trustees  executed  a  second  mortgage, 
called  the  land  income  mortgage,  amounting  to  $480,000,  the  proceeds 
of  which  were  used  in  paying  the  interest,  charges  and  expenses  of  the 
Land  Department.  This  made  an  entire  debt  against  the  land  grant  of 
$4,000,000. 

Now  let  us  see  what  has  been  done  with  the  land  grant  itself.  On 
the  first  of  January,  1884,  we  find  the  following  condition  of  affairs: 
There  have  been  sold  1,855,490  acres  of  land  for  the  sum  of  $8,634,- 
741.01.  The  total  amount  of  cash  which  has  been  received  by  the 

(26) 


27 

Land  Department  from  its  organization  up  to  the  31st  of  December, 
1883,  has  been  $6,984,611.60,  which  has  been  disposed  of  as  follows: 

Paid  out  for  taxes  to  State  and  counties $1,114,299  20 

Paid  out  for  immigration  work,  and  for  conducting  the  Land  Department 1 ,228,976  19 

Paid  for  interest  on  land-mortgage  bonds  and  land-income  bonds 2,655,017  27 

Paid  out  for  purchasing  and  cancelling  land-grant  bonds 814,000  00 

Paid  out  for  purchasing  and  cancelling  land-income  bonds 480,000  00 

Funds  for  purchase  of  land-grant  bonds 668,925  43 

Paid  out  for  the  expenses  of  the  land  trust 23,393  51 

Total 86,984,611  60 

It  will  be  seen  from  the  above  figures  that  not  one  dollar  of  the  entire 
receipts  from  the  land  grant  has  in  any  way,  shape  or  form  been  received  by 
the  stockholders  of  the  railroad  company,  and  up  to  this  day  every  dollar 
which  has  been  received  has  been  used,  either  in  payment  of  taxes,  in 
payments  for  immigration  and  other  work  done  for  the  road  and  the 
State,  or  in  payments  of  the  principal  and  interest  of  the  bonded  debt 
incurred  in  the  construction  of  the  railroad. 

Now  let  us  see  what  is  the  condition  of  the  land  grant  as  it  is  to-day : 
There  are  outstanding  debts  still  unpaid  amounting  to  $2,706,500. 
Against  this  debt  there  are  the  following  assets  belonging  to  the  Land 
Department: 

Unpaid  principal  of  land  contracts $1,303,773  97 

Land  lying  east  of  Dodge  and  nearly  all  west  of  Newton,  685,486.92  acres,  at  $1.75  per  acre,  1,199,602  11 

Land  lying  west  of  Dodge,  562,257.46  acres,  at  $1  per  acre 562,257  46 

Cash  received  from  previous  years,  and  held  by  trustees  for  purchase  of  land  bonds 668,925  43 

Total $3,731,568  97 

It  will  thus  be  seen  from  the  above  figures,  that  if  these  prices  are 
successfully  obtained  for  the  part  of  the  lands  now  remaining  on  hand, 
the  railroad  company  will  receive  about  $1,000,000  from  the  land 
grant,  and  this  is  the  entire  amount  that  has  been  realized,  or  will  be 
realized  when  the  entire  land  grant  shall  have  been  sold.  . 


I 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 
Renewed  books  are  subject  to  immediate  recall. 


25Jun'608B 

»#*e*t 

M»llm 

K_o  D 

J  UN  2  3  1960 

LD  21A-50m-4,'60 
(A9562slO) 


UniTersity  of  California 
Berkeley 


Stockton,  Calif. 
T.M.  Reg.  U.S.  Pat.  Off. 


M17213G 


THE  UNIVERSITY  OF  CALIFORNIA  LIBRARY 


